MERS in the middle of foreclosure chaos

As courts across the country face a wave of foreclosures, a name little known to the public has cropped up on thousands of court filings as a stand-in for prominent banks, lenders and mortgage servicers.

Mortgage Electronic Registration Systems, headquartered in a nondescript office building in Reston Town Center, has flourished quietly over the past decade, saving financial firms hundreds of millions of dollars by helping them avoid the time and expense of filing mortgage documents and paying fees each time a loan changes hands.

Its motto: “Process loans, not paperwork.”

But lawyers throughout the country increasingly are challenging that approach, questioning whether the company has the legal right to foreclose on homes, on the grounds that it doesn’t actually own mortgages. And the argument is gaining traction with some judges.

Yet without proper paperwork to establish ownership, banks and other lenders have also faced legal difficulties with seizing homes when borrowers default. The result in some cases has been the use of flawed and fraudulent documents in foreclosure cases. …